JD.com, Inc. ($JD)

Hello, and thank you for standing by for JD.com's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Good day, everyone. Welcome to JD.com's First Quarter 2026 Earnings Conference Call. With us today are CEO of JD.com; Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick up the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which apply to this call. We'll discuss certain non-GAAP financial measures. And also please refer to the reconciliations of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned in this call are in RMB, unless otherwise stated. Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our first quarter 2026 earnings conference call. . We kicked out 2026 on firm ground. In Q1, our total revenues grew by 4.9% year-on-year, marking a sequentially accelerated pace as key growth drivers stayed firmly on track. We saw a sequential rebound in electronics and home appliances categories, while our general merchandise marketplace and marketing revenues maintained double-digit growth trajectory in the quarter. Moreover, our profitability continued to see steady growth. JD Retail's operating margin expanded by 0.7 percentage points year-on-year to 5.6% in the quarter, nearing historical highs. This expansion achieved against a high comparison base for margin underscores our operational resilience and housing mix shift. Our new business segment also delivered a meaningful sequential loss reduction in the quarter, led by improved efficiency at JD food delivery while [ Jingxi ] and international business maintained prudent investment discipline. Overall, we are pleased with this strong start to the year, with our emerging growth drivers, taking solid shape, while our profitability across all segments, steadily trending upward. Moving to our operational highlights. I would like to share three areas of robust progress we made during the first quarter. First, we maintained robust momentum in both user base expansion and engagement. In Q1, both our quarterly active customer and annual active customer base grew by over 20% year-on-year with AAC hitting a new record. This growth was powered by both healthy organic user growth in core JD Retail and strategic contributions from our new businesses, including food delivery and [ Jingxi ]. Notably, JD Plus members, our most loyal and high-value user group delivered another quarter of double-digit year-on-year growth in membership scale. Beyond scale, the quality of our user engagement is reaching new heights. Our quarterly customer shopping frequency rose by a notable 37% year-on-year in Q1, a powerful testament to the synergies, we are successfully unlocking across our core retail engine and new businesses initiatives. This due momentum in both scale and frequency provides a solid foundation for us to further optimize the overall value of our user ecosystem. As our user base continues its rapid growth over multiple consecutive quarters. Our strategic focus is clear: fostering deeper loyalty and driving the upward migration of user quality are the key next steps towards advancing our long-term growth road map. Second, our core retail business demonstrated strong receiving in Q1. we delivered revenue growth in line with expectations while driving operation margin towards historical peaks despite notable near-term headwinds, including the high [ trade-in ] base, and rising product prices for electronics. This performance underscores the enduring strength of our supply chain-driven model, which consistently enables us to navigate market cycles, while delivering a steady upward changing performance. Q1 JD Retail's revenues grew by 1.8% year-on-year, with broad-based sequential acceleration across all revenue streams. Looking at category performance in Q1, while revenues of electronics and home appliances were down 8.4% year-on-year. This still represents a sequential improvement. Moving ahead, while we navigate ongoing external headwinds in Q2, we remain confident in stronger performance in electronics and home appliances in the second half of the year. Our confidence is rooted in our continuous efforts to strengthen our supply chain capabilities, prioritize superior user experience and drive systemic cost optimization and efficiency gains. Our general merchandise category remains a standout with revenue growth accelerating sequentially to 14.9% year-on-year in Q1, led by supermarket health care, home goods, apparel, among others. Holding 6 consecutive quarters of strong double-digit growth. General merchandise has contributed over half of our total [ GMV ], solidifying its position as an increasingly important growth driver. We maintain a positive outlook for this momentum to continue throughout 2026, as we leverage our supply chain advantages and increasing scale benefits to continue to provide our users with diversified reliable product offerings, competitive pricing and premium services. With the vast total addressable market and deepening user main share, we are well positioned to capture the significant market opportunities ahead. JD Retail's advertising and commission revenues have become a powerful engine for high-quality growth. We are pleased to report another quarter of strong double-digit growth in retail advertising and commission revenues for Q1. This performance served as a primary [ checklist ] for the 18.8% year-on-year growth in our total marketplace and marketing revenues at the group level. As a high-margin business, advertising and commissions continues to structure optimize our revenue mix, providing a resilient foundation for margin expansion. We expect advertising and commission revenues to remain an important growth driver for JD Retail throughout 2026, fueled by the following factors: our supply chain strength, expanding user base, enhanced [ 3P ] ecosystem and traffic allocation efficiency, optimize AI-powered advertising conversion and deepening synergies across our business. Notably, JD food delivery business is already proving its strategic value, contributing an incremental 3% to advertising revenues in Q1. [indiscernible] effectively expanding our user touch points, Food delivery is creating high frequency monetization opportunities that complement our core retail operations. In addition to top line resilience, another compelling highlight this quarter is the encouraging expansion of JD Retail's profitability. Operating profit surged by 16.5% year-on-year to RMB 15 billion, reaching a record high for quarterly profit and driving operating margin to 5.6% against the challenging external complexities we outlined earlier. This is fundamentally answered in our supply chain steps, which continue to yield expanding economies of scale and optimize procurement efficiencies. [ This in turn ] fueled a broad-based gross margin expansion across our categories. Leasing Retail's gross margin to a remarkable 18.6% in the quarter, up 1.8 percentage points year-on-year. This margin uplift was further amplified by a favorable revenue mix shift, particularly they increased the contribution from high-margin streams such as advertising and commissions. We believe JD Retail's margin profile is a clear reflection of our evolving structural efficiencies, which we expect to provide further headroom for optimization going forward. Moving on to our new business segments. We are beginning to see the fruits of our efficiency-oriented strategy, marked by a significant sequential narrowing of losses and deepening synergies with our poor retail businesses. In Q1, JD food delivery achieved the steep sequential reduction in launch to date, while sustaining healthy order volumes, food delivery continued to improve its operating efficiency and diversify revenue streams. Resulting in material improvement in unit economics. This progress underscores our commitment to a rational healthy development of the business and reinforces our clear stance against evolution within the sector. We fully embrace the regulatory guidance, and we'll continue to align our business strategy with full compliance, prioritizing operational efficiency and high-quality growth as we move forward. [indiscernible] and [ Joybuy ], all the initiatives advanced steadily in line with their strategic road map while adhering to prudent investment discipline, Jingxi continue to deepen its penetration in lower-tier markets, particularly Tier 6 and rural townships, successfully tapping into new user growth opportunities for our platform. [ Joybuy ] has seen solid momentum since its official launch in March, with order volume and user retention trending has. At the end of Q1, it's same and next-day delivery service spend over 30 major European cities. Serving a population of over 40 million. Collectively, the total investment in our new businesses segment narrowed by over 30% sequentially, this was driven by our rational expansion strategy and an efficiency first operating philosophy. Building on this solid execution in Q1 we now have clearer visibility to further deliver on our efficiency-oriented investment goals for the new business segment throughout the full year. We also continue to integrate AI across our entire value chain from demand identification and stimulation, 1P and 3P supply sourcing to autonomous logistics and premium customer services. In particular, we made further headway in logistics automation. In Q1 JD Logistics launched its next-generation [ Longtaker ], robotic arm. This proprietary technology is optimized for handling packages of diverse sizes and shapes as well as automated case loading. This milestone marks the successful transition of this technology from the lab to real-world operations, and enables us to significantly boost our sorting efficiency and competitive edge. Additionally, our AI-powered digital human, [ Joy streamer ] has transitioned from a functional tool to an intelligent AI agent. With the number of merchants and live streaming sections that utilize this technology surging tenfold year-on-year in Q1. Our goal is simple, to translate AI innovations into tangible retail experiences and sustainable value. We are well positioned to lead at the forefront of AI commerce and capture the vast opportunities ahead. In summary, Q1 has been defined by strong execution and strategic consistency. Our performance across all segments has validated our road map, contributing to both resilient top line growth and robust profitability. With this solid foundation, we are confident in our full year trajectory and the long-term prospects. We will maintain the operational activity necessary to proactively navigate Q2 fluctuations, including a high trading base and rising product prices for electronics, while fully leveraging our supply chain-driven model. Our commitment remains unwavering to scale our business by delivering a premium user experience with continuous cost optimization and efficiency gains. With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In the first quarter, our strategic execution remains firmly on track, as we delivered a resilient overall financial performance. Total revenues grew by 5% year-on-year, while non-GAAP net profit attributable to ordinary shareholders came in at RMB 7.4 billion, reflecting a strengthened sequential momentum across both our top and bottom line. Notably, our core retail segment returned to growth this quarter while delivering healthy year-on-year profit expansion. We also recorded a significant sequential loss narrowing in our new business segment, back by consecutive loss reductions in food delivery. Alongside our resilient financial results, we remain fully committed to shareholder return. During the first quarter, we repurchased a total of approximately 44.5 million Class A ordinary shares, equivalent to 22.3 million ADS for a total of USD 631 million. This represents around 1.6% of our total ordinary shares outstanding as of December 31, 2025. In addition, we completed our annual cash dividend payment in April, totaling approximately USD 1.4 billion or $1 per ADS. Our continuous execution of our shareholder return plan. underscores our strong conviction in JD's long-term value creation. Now let's go through our Q1 financial performance. Our total net revenues were up 5% year-on-year to RMB 316 billion in Q1. Breaking down the mix. Product revenues were up 1% year-on-year, driven by a 15% search in general merchandise, which effectively cushioned the temporary decline in electronics and home appliances against a high trading base. Both categories saw sequential growth acceleration. Notably, general merchandise has extended its double-digit growth streak to 6 consecutive quarters. Within this, supermarket outperformed by sustaining its double-digit growth momentum, which further accelerated in Q1 compared to the previous quarter. As we move ahead, we expect the impact of the high trading base and rising product price for electronics to persist in Q2, which will temper the growth trajectory of electronics and home appliances, but we remain confident in a stronger performance in the second half of the year. Service revenues grew by 21% year-on-year in Q1. Within this, marketplace and marketing revenues rose 19%. And advertising revenues remained a key driver, posting its sixth consecutive quarter of double-digit growth. By optimizing traffic allocation and conversion, we have effectively translated robust user engagement into superior ROI for our brands and merchants, a trend we expect to sustain throughout the year. Logistics and other service revenues were up 22% year-on-year. This growth was driven by both incremental delivery revenues from our food delivery business. and the robust performance across JD Logistics diverse service offerings. Now let's turn to our segment performance. JD retail revenues were up 2% year-on-year in Q1. While we continue to navigate near-term headwinds in electronics and home appliances, we remain confident in our second half rebound in those categories. Meanwhile, our emerging growth drivers, including general merchandise and marketplace and marketing services are expected to sustain the robust momentum. JD Retail's gross margin expanded by 1.8 percentage points year-on-year. to an impressive 18.6% in the quarter. This expansion was attributable to our enhanced supply chain capabilities, which led to gross margin appreciation across all major categories. In addition, it's also reflected a favorable mix shift as our high-margin general merchandise and marketplace and marketing revenues outpaced the overall growth. Consequently, JD Retail's non-GAAP operating income increased by 16% year-on-year to RMB 15 billion in Q1 reaching the highest quarterly level for JD Retail, with operating margin rising 7 bps to 5.6%. This was achieved through a strategic balance of gross margin expansion, marketing efficiency and increasing investments in R&D for long-term growth. Notably, JD Retail's marketing expense ratio has declined year-on-year for 3 consecutive quarters. a strong testament to the deepening synergies with our new business initiatives. Moving to JD Logistics, its revenues grew by 29% year-on-year in Q1, driven by incremental contribution from food delivery. On the profitability front, JD Logistics non-GAAP operating income surged by 600% year-on-year in Q1. This exponential growth was driven by technological leverage from our AI and robotics initiatives alongside broader operational optimization. In our new business, revenues came in at RMB 6.3 billion, reflecting a moderated pace due to the resegmentation of our on-demand delivery revenues from new business to JD Logistics. Non-GAAP operating loss in new business narrowed significantly on a sequential basis to RMB 10.4 billion, led by JD food delivery, while Jingxi, our international business remained disciplined in their investments. In particular, JD food delivery delivered its most significant sequential loss reduction since inception, driven by its improved unit economics as we continue to boost operating efficiency and diversified revenue streams, combined with a disciplined rational response to market dynamics. Turning to our consolidated profit performance. Group level gross margin expanded by 90 bps year-on-year to 16.8% in Q1, this expansion was primarily driven by the strong performance of JD Retail, serving as a clear validation of the structural progress as we have made in broadening and strengthening our margin [indiscernible]. In terms of OpEx, total operating expense as a percentage of revenues increased year-on-year in the quarter, primarily reflecting increased marketing spending in JD food delivery and higher R&D investment to fuel our long-term growth and efficiency improvement. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 7.4 billion in Q1, representing a non-GAAP net margin of 2.3%. Regarding our liquidity, last 12 months free cash flow as of the end of Q1 stood at RMB 22 billion, compared to RMB 38 billion in the prior year. This primarily reflects cash outflows associated with the trading program alongside flight to issuance in operating income. By the end of Q1, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 216 billion. In summary, Q1 was another quarter that underscore the resilience and adaptability of our supply chain-driven model. We achieved a sequential acceleration in top line growth, while successfully maybe gaining a complex external environment. Both JD Retail and new business delivered robust profitability improvements and steadily moved along the strategic road maps. Our scalable AI applications are increasingly transforming our core assets. into a distinct competitive mode in the era of AI commerce. With this solid foundation, we are firmly committed to unlocking long-term value for our shareholders. This commitment is underpinned by our proven track record of growth, a clear trend of margin expansion and our solid shareholder returns. With that, I'll turn it back to Sean. Thank you.

Thank you, Sandy, [Operator Instructions] Operator, you can open the call for Q&A now. .

[Operator Instructions] Your first question today comes from Kenneth Fong with UBS.

[Foreign Language] [Interpreted] My first question is on the growth. Despite facing a high base in the first quarter, JD retail still deliver better-than-expected growth and maintain solid performance even as overall market decelerate in March. Has management observed any shift in consumer behavior? Particularly in the context of price increase in electronic categories? How should we think about the growth trend over the next 2 quarters? And my second question is about the margin. Against the backdrop of macro uncertainty intensify industry competition and increased platform subsidies alongside with a rising ASP in electronic products, how should we assess [ JDR ] margin trajectory going forward?

[Foreign Language]

[Interpreted] thank you, Kenny. Let me answer your first question regarding growth. In Q1, JD Retail delivered a solid performance with revenue growth accelerating Q-on-Q for electronics and home appliance while our growth was impacted by the high base from trading subsidiaries last year, we leveraged our supply chain capabilities and strong user mindshare to win even greater trust from a user which helped us further consolidate our market leadership. For general merchandise category revenue growth maintained a double-digit pace further accelerated to 15% year-on-year. Notably, our supermarket category recorded double-digit growth for the ninth consecutive quarter. This clearly shows that our growing user mindshare in the general merchandise category.

[Foreign Language]

[Interpreted] regarding the impact of price hikes in the 3C and home appliance industries. So yes, due to the rising memory cost, we have seen industry-wide price tags for smartphones and PCs since March. This round of price increases is sharp and widespread. So in short term, it indeed dampens consumer demand to some extent. At the same time, we are seeing consumer purchases are shifting toward high -- mid- to high-end models and top-tier brands. So -- but in a challenging time, JD's unique proposition becomes even more clear we will leverage our efficiency of our supply chain to bring users a better experience in both price and service. At the same time, we'll help brands achieve more efficient sales with greater certainty. Our unique competitive edge is even more pronounced for the high end -- mid- to high-end models and top-tier brands. So overall, as a result, we believe our market position will further solidify.

[Foreign Language]

[Interpreted] Looking at the full year, the rest of the year is the second quarter sales of electronics and home appliances are expected to continue to face temporary fee pressure. This is due to the even higher base from trading program last year, combined with the impact of price hikes on smartphones and PCs impacting consumer sentiment. We will continue to strengthen our mind share while helping brands achieve more certain sales. Moving into the second half of this year, we have stronger confidence growth acceleration, especially for home appliance category as the comparison base returns to normal and the continuous expansion of our omnichannel sales network further create greater sales potential for home appliance category. At the same time, we are confident in the healthy growth for both general merchandise and advertising and commission revenues. JD's growth engines are becoming more diversified. This gives us confidence to deliver healthy growth for the full year, even in a volatile year.

[Foreign Language]

[Interpreted] In the first quarter, JD Retail achieved double-digit growth in operating profit. Its operating margin also expanded steadily to 5.6%. We -- this was primarily driven by, first, gross margin expansion for both our core electronics and home appliances and fast-growing general merchandise categories we have leveraged our supply chain capabilities to drive industry efficiency. While creating value for brands, we have also enhanced our own profitability. Achieving year-on-year expansion in gross margins across categories. In the meantime, marketing efficiency improvement, JD Retail's marketing expense and expense ratio have seen year-on-year optimization for 3 consecutive quarters. And new businesses, including JD food delivery and Jingxi effectively drive traffic growth for our platform. We are allocating marketing resources with greater precision and efficiency, thereby enhancing the overall return on our marketing expenses. Lastly, while improving our gross margin and marketing efficiency we remain deeply committed to R&D development, particularly in AI. In Q1, our R&D expense continued to meaningfully increase and is expected to maintain an upward trend for some time ahead. We believe such investments will gradually translate to operational benefits, driving AI-powered efficiency gains and further optimizing our overall cost structure.

[Foreign Language]

[Interpreted] Looking ahead, our Q1 performance already further validates JD Retail's ability to deliver steady margin expansion over time. So we remain firmly committed to our long-term high single-digit margin target. The key drivers of this include: first, our 1P capabilities, will continue to enhance our 1P supply chain strength and leverage scale benefits to drive consistent product sales gross margin expansion. JD Retail's gross margin has delivered year-on-year improvement for 16 consecutive quarters, and we believe there is still upside potential. Second, category improvement we see meaningful margin upside in categories, including supermarkets. Additionally, as we continue to optimize the product mix within our electronics and home appliances categories, we expect further margin expansion over the long term. Third, platform ecosystem, we will be driving the healthy development of our platform ecosystem. This will support our high-margin service revenues such as commission and advertising to grow at a robust pace contributing to our overall margin expansion. That said, while still at a lower take rate level compared to the industry, and we believe there is substantial potential for improvement for us. In the long term, as China's largest retailer with supply chain at core, JD has the industry's most diverse application [indiscernible] for AI and automation. This presents significant potential for us to continuously enhance user experience, reduce costs and drive greater efficiencies.

Thank you, Kenny. We can go to the next analyst.

Your next question comes from Ronald Keung with Goldman Sachs. .

[Foreign Language] [Interpreted] My question first is about international, since that you've launched [ Joy Buyers ] [indiscernible] countries in Europe, how should we train the near-term investment intensity to drive a critical order volume scale and how you think about the longer-term impact on a kind of [ ex-year ] basis on new business loss and the ROI from this investment. Second is on AI agents, which are increasingly driving consumer search and purchasing. So how will JD leverage the unique moat as China's largest retailer in this? And what are your defensive or [indiscernible] strategy in light of agent interactions and on partnerships?

[Foreign Language]

[Interpreted] Thank you, Ronald, for your question. First, on [ Joy buy ]. [indiscernible] was officially launched on March 16 -- so it leverage JD supply chain capabilities and localized operations, now [ Joy buy ] joined by partners with top global brands to offer European users a full category of products at competitive pricing. At the same time, backed by our self-build logistics network in Europe, [ Joy buy ] is bringing JD signature, same and next-day delivery speed to -- that we offer in China to European consumers. Currently, Joy buy maintains an encouragingly high user rating on Trust Pilot, a leading consumer review platform, our high-quality products and excellent delivery experience are helping us winning trust of local customers.

[Foreign Language]

[Interpreted] In terms of investments, in Q1, investment of our international business remained stable Q-on-Q as we keep improving operating efficiency over the next few quarters, where we will execute our extent strategy. As our business grows healthily, the overall investment may gradually increase as well. That said, as order volume growth, the economy of scale will kick in and continuously improve our unit economics. So overall, we -- our international business investment is highly manageable and remains in line with our initial expectations.

[Foreign Language]

[Interpreted] Looking ahead, international expansion is a long-term strategy for JD. We will steadily expand our footprint and build our capabilities. In the meantime, we will strictly maintain our financial discipline and focus on ROI to drive healthy sustainable growth. In terms of capability building, we'll focus on -- focus our investment on key supply chain areas, including product fulfillment technology systems et cetera. This will allow us to bring a more competitive price product offering to European user improved delivery experience and further differentiate the Joy buy experience. Over the long run, these investments will translate into better user retention and lock economic scale and drive long-term ROI. We are confident that the JD's core supply chain mode, especially our highly efficient 1P model, combined with strong logistics capabilities give us the potential to redefine industry efficiency and user experience on a global scale.

[Foreign Language]

[Interpreted] Regarding the second question on AI, we believe no matter how technology evolves, whether AI assisted shopping or -- the essence of retail remains unchanged. It has always centered on delivering better user experience, lower cost and higher efficiency to meet users' continuous pursuit of better product, price and service. This is also the [indiscernible] [ mold ] of JD that we have been building over the past 2 decades of deep investment in supply chain. Today, we are leveraging new technologies, including AI and robotics to further enhance the user experience while reducing costs and improving efficiency. Now let me walk you through a few examples.

[Foreign Language]

[Interpreted] On the demand side, we are making a comprehensive upgrade with our self-developed AI agent called [ Xin Yang ] to help us more precisely identified, stimulate and match consumer demand. [ Xin Yang ] has provided a more efficient and convenient shopping experience within the JD app.

[Foreign Language]

[Interpreted] In Q1, we have seen [ Xin Yang ] demonstrate strong growth momentum with this quarterly active users growing by over 200% year-on-year, while the growth of user engagement was even more robust, increasing by over 300% year-on-year.

[Foreign Language]

[Interpreted] Our internal workflow, our procurement and sales agents can analyze front-end market demand to uncover new business opportunities and then source more suitable merchants and product. Our procurement and sales agent can also automate routine operational tasks such as merchant and product management inventory management and marketing activities, enabling our procurement team to operate and make decisions with greater efficiency. At the same time, we have developed a suite of AI tools to help merchants enhance their operational efficiency, including marketing content generation, [ Joy streamer ], our digital human live streaming solution and AI-powered customer service.

[Foreign Language]

And on the procurement side, we are broadly deploying AI and robotic technology to continuously drive up our automation and robotics coverage. . Currently, JD's [ Lonzo ] tax series of robots is able to cover the entire logistics chain and has been deployed at a scale -- at a global scale. Gradually delivering cost reduction and efficiency gain.

[Foreign Language]

[Interpreted] So therefore, you can see by deploying this agent, we are connecting and upgrading individual process into a seamless end-to-end workflow which essentially building an agent to agent framework. By replacing inefficient intermediary layers we are positioned to realize a step change in the overall efficiency. Thank you, Ronald. We can go to the next analyst.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] [Interpreted] As the food delivery landscape gradually improves, we understand that JD remains committed to investing in this area to drive new user acquisition and also cross-selling. So can management share whether the goal is to operate that business profitably? Or furthermore, does JD actually aim to break even at the same time as the competitors or does management view food delivery as a long-term strategic investment that will continue to operate at a slight loss or maybe just near a breakeven point. And then second question is that what is management view on the future [ FMCG ] and also the fresh category landscape. So what could be the share split between the large supermarket chain the online, the on-demand, the quick commerce, what will be the preferred models that JD want, and which model will be more profitable? And then any views and thoughts on the competition landscape evolving?

[Foreign Language]

[Interpreted] first, in Q1, while keeping healthy order volume, JD food delivery achieved beget sequential loss reduction to debt with solid progress in UE improvement. On food deliveries revenues as we continue to optimize operations and upgrade advertising system, total revenues of commission and advertising surged nearly 2x on a quarter-on-quarter basis in Q1. At the same time, we maintain a rational approach amidst industry-wide subsidy competition. We continue to refine our operations and marketing efficiency across different user groups and regions. Furthermore, through supply chain innovation, we are advancing the growth of this business. will also fully implement regulatory requirements and remain committed to compliant operations.

[Foreign Language]

[Interpreted] We believe our food delivery business will eventually achieve profitability. However, JD food delivery is not a stand-alone business, we will be unlocking its synergetic value within our business ecosystem. On users front, first user skill JD food delivery has been driving healthy growth in traffic and user base for our platform. In Q1, both our DAU and quarterly active customers increased by over 20% year-on-year and a number of our annual active customers reached a record high. This also contributed to our advertising revenue growth. Second, user engagement as full delivery effectively fulfills the demand of our existing high-quality users. It helped to drive a 37% year-on-year increase in user shopping frequency on our platform. Third, [ post-sale ], we've also seen stronger cross-category purchases a multiple delivery users, particularly in supermarket categories and our on-demand retail offering.

[Foreign Language]

[Interpreted] On the [ slide ] side, food delivery also enriches the location-based supply on our platform, spending categories from dining and supermarket to general merchandise. This also enables us to deepen partnerships with merchants and brands. On the performance side, we will be unlocking and testing synergies between food delivery and logistics performance. to develop a robust last mile infrastructure. This not only enhances of our on-demand delivery capacity but accelerates the coordination and optimization of our overall [ Jingxi ] operations and management.

[Foreign Language]

[Interpreted] Food delivery and on-demand retail are long-term strategies for JD, we will drive healthy development of the businesses through a long-term perspective.

[Foreign Language]

[Interpreted] let me answer Alicia's second question on supermarket. So first, China supermarket sector has a massive market size, nearing RMB 10 trillion in scale, yet it remains highly fragmented. So this indicates significant room for potential cost of optimization and efficiency gain as well as for the growth in online penetration. Within the supermarket category, we operate multiple models, including 1P model, which focuses on delivering a reliable consumer experience platform model, which offers selection and diversity and additionally, the on-demand retail model, which has been growing rapidly on JD in recent years. So these models are not simply replacing one another. Instead, they address diverse consumer demand across different shopping scenarios by emphasizing distinct advantage in efficiency, timelessness and selection.

[Foreign Language]

[Interpreted] As a B2C retailer with deep supply chain expertise, JD supermarket holds significant competitive advantages across product selections, supply chain and warehouse management, cost and price competitiveness and user experience despite intense market competition. As the largest supermarket in China, JD supermarket has demonstrated remarkable growth resilience achieving double-digit revenue growth for 9 consecutive quarter. On profitability, we continue to enhance profitability of superman category by leveraging our scale advantage and supply chain capabilities. Looking ahead, we still see substantial runway for improvement in both gross margin and our fulfillment expense ratio, allowing us to and this results from our scale and sustained steady growth will gradually expanding our profitability. We believe that competition in supermarket sector will ultimately return to the focus on user experience, cost and efficiency by leveraging our continuously improving self-operated supply chain capability, JD supermarket delivers better product at lower price to customers. While helping brands achieve consistent and incremental sales, we are highly confident that in the long term, healthy growth -- in the long-term healthy growth of supermarket which is becoming a key growth engine for us in the coming years. Thank you, Alicia. Let's go to the next analyst, please.

Your next question comes from Thomas Chong with Jefferies.

[Foreign Language] [Interpreted] I have two questions. My first question is about the latest update about our ecosystem strategies, including numbers of 3P merchants contribution as well as the outlook over the next few quarters? And my second question is about our capital return. Can management share the latest updates about the return to shareholders?

[Foreign Language]

[Interpreted] Our platform ecosystem always centers on user experience, lower cost and cost efficiency. By leveraging different business models, we provided the best combination of product, price and services to meet diverse consumer needs. We have made solid progress in our platform ecosystem development. Let me share a few key indicators that maintain rapid growth in Q1. First, our active merchant base. It maintained a triple-digit year-on-year growth rate in Q1. We've onboarded more high-quality brands and industrial value merchants, providing users with a more diverse product supply. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants, further expanding our service goal. Second, users, we have seen positive feedback from users. The number of users who shop to 3P offerings on our platform grow at a fast pace, outpacing the growth of our total users. This also supported the fast growth of 3P order volume, which accounted for over 50% of our total orders in Q.

[Foreign Language]

[Interpreted] From a financial perspective, in Q1, our 3P GMV grew faster than 1P and the total GMV. More importantly, our marketplace and marketing revenues have delivered double-digit growth for 6 consecutive quarters. The increase in contribution from these high-margin revenue streams continues to drive our overall profitability. Over the long term, we believe 3P GMV contribution will surpass 1P. Our platform ecosystem will become a key driver for both our revenue growth and margin expansion.

[Foreign Language]

[Interpreted] Regarding shareholder returns. In the first quarter, we repurchased a total of around 44.5 million ordinary shares equivalent to 22.3 million [ ADS ] for a total of USD 631 million representing 1.6% of our total ordinary shares outstanding as of the annual 2025. The remaining amount of our ongoing repurchase program is USD 1.4 billion, and the expired date will be August next year. We expect to continue to execute our share buyback at planned pace. In addition, we announced an annual cash dividend of $1 per ADS for the year of 2025 in March and completed payment in April as planned. Going forward, we remain committed to returning value to our shareholders through dividends and share buybacks. At the same time, we will maintain focus on achieving healthy long-term growth in business scale, profitability and cash flows. We aim to share JD success with our shareholders in multiple ways.

Thank you. That's all the questions we can take today. So let me just wrap up running over time. Thank you for joining us on the call today, and thanks for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com. We look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]